Commercial Hire Purchase

Commercial Hire Purchase is a popular method of financing vehicles and business assets due to its flexibility and tax deductibility. With CHP, the borrower is deemed to be the owner (purchaser) of the asset and therefore receives the tax deduction for the depreciation of the vehicle or asset plus the interest portion of the monthly repayments. The borrower has the option of both putting a deposit towards the purchase or financing the full amount of the purchase price.

The option also exists to either fully pay off the loan or have a balloon amount at the end of the term. The GST on the transaction is in the purchase price of the asset and can be recouped up front by the purchaser if the accrual accounting method (turnover > $1 million) is used or over the term of the agreement if the cash method of accounting is used. CHP is now the most popular method of financing assets primarily due to the available flexibility.